Market Preview – NFP Forecast

The US monthly jobs report is set to be released today and the consensus estimate is for 190,000 jobs to be released and the Unemployment rate consensus estimate is for 3.5% vs 3.4% prior.

An upside surprise is possible given that Private businesses in the US created 278,000 jobs in May of 2023, compared to a downwardly revised 291,000 in April and well above forecasts of 170,000.

It is important to note that the US economy unexpectedly added 253,000 jobs in April 2023, beating forecasts of 180,000 and following a downwardly revised 165,000 in March.

The April number largely exceeds the 70,000-100,000 monthly job gain needed to keep up with growth in the working-age population and compares with the average monthly gain of 290,000 over the prior 6 months.

The March reading was revised sharply lower to 165,000 from an initial estimate of 236,000, so do keep an eye on revisions. In terms of market forecasts Participation rate prior 62.6%.

Banks are also out with their forecasts and Morgan Stanley are looking for a below consensus headline. They note that “We expect total nonfarm payrolls increased by 170k in May.”

They state that “an uptick in participation from 62.56% to 62.62%” and “We expect average hourly earnings to increase by 0.3%M, holding the year-over-year rate at 4.4%.”

Bank of America have been also out with their predictions and our slightly more bullish as they note that “we forecast a 200k increase in Non-farm payrolls”. They also expect the unemployment rate to remain at 3.4%.

BOA quantify this and say this “would leave payroll growth well above levels needed to offset the pace of natural growth in the labour force, thereby putting downward pressure on the unemployment rate in an already tight labour market.”